Author Topic: What happens if you over-contribute to your HSA?  (Read 1957 times)

rothwem

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What happens if you over-contribute to your HSA?
« on: December 08, 2016, 12:41:06 PM »
I mentioned this in a different thread, but I broke my collarbone at the beginning of November.  It was pretty badly broken and I had to have surgery to bolt it back together.  Total surgery cost was just over $25k, luckily, my out of pocket max was only $3500.  With that said though, the max you're allowed to contribute to the HSA is 3350.  Not knowing this at the time, I went ahead and put 3500 post-tax dollars in my HSA so that I could pay my out of pocket max tax-free.  The HSA didn't flag it, and I don't think I can take it back out again. 

Am I only going to get the tax benefit from 3350 of the 3500?  Will that money somehow disappear? Is there a way to apply that to next year?

msilenus

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Re: What happens if you over-contribute to your HSA?
« Reply #1 on: December 08, 2016, 12:55:10 PM »
I've unfucked something like this, but not exactly the same.  It's been a while.  It's not easy.  I think the surest way to fix this is to do two things:

1) Work with the administrator to return the ineligible portion of the distribution.  (You shouldn't have had some of that money in there to begin with.)
2) Work with the administration to make an excess contribution withdrawal.

Yes: that's putting money in so you can take it out.  But before I did it that way, tax forms would show negative numbers where that should be impossible.  Again: my situation was somewhat different.  I'm not 100% sure you need to do #1.  It's probably easier to do #1 than to figure out if it's necessary.

Also: Federal law only requires the administrator to offer the ability to do one of the two things above.  The other is optional.  I have no idea what happens if an administrator is legally making it impossible to get  an HSA into a compliant state.

Sorry you're in this spot.  Good luck!
« Last Edit: December 08, 2016, 12:56:49 PM by msilenus »

msilenus

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Re: What happens if you over-contribute to your HSA?
« Reply #2 on: December 08, 2016, 01:33:24 PM »
Final tip: try to get this stuff done this year.  Else, you might need to request amended forms before filing.  That can create a lot of date pressure and stress.

AZDude

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Re: What happens if you over-contribute to your HSA?
« Reply #3 on: December 08, 2016, 03:37:05 PM »
If it is post-tax dollars, then I imagine absolute worst case scenario is the IRS says you owe 35% taxes on that $150, or ~$55.

I wouldn't worry too much about it.

QueenV

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Re: What happens if you over-contribute to your HSA?
« Reply #4 on: December 08, 2016, 09:39:18 PM »
Your plan administrator should be able to back the excess funds out. I'm in HR and have done that for several employees.

meerkat

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Re: What happens if you over-contribute to your HSA?
« Reply #5 on: December 09, 2016, 07:43:45 AM »
If it is post-tax dollars, then I imagine absolute worst case scenario is the IRS says you owe 35% taxes on that $150, or ~$55.

I wouldn't worry too much about it.

This is what I ran into. I didn't realize in time that I had over-contributed so we just had to do a little extra work at tax time.